How to be more attractive

Small business owners who offer retirement plans report a positive impact on their ability to attract and retain employees, yet not all small business owners know about affordable retirement plan options, according to the 2000 Small Employer Retirement Survey.

Sponsored by Columbus-based Nationwide Financial, among other companies, and conducted by Employee Benefit Research Institute, American Savings Education Council and Mathew Greenwald & Associates, the survey provides insights into the challenges small business owners face in deciding whether to offer a retirement plan.

According to the Bureau of Labor Statistics, 46 percent of full-time workers in small businesses were covered by a retirement plan in 1996. The survey finds this number has held steady, despite efforts by lawmakers to boost retirement plans for workers in small businesses.

The study finds many small business owners are unaware of plan options available to them, especially those created for small businesses, such as a savings incentive match plan for employees — better known as SIMPLE. The Small Business Job Protection Act of 1996 created SIMPLE plans to give small businesses a simplified tax-favored plan for their employees. The plans may be in the form of either an IRA or a 401(k).

Thirty-three percent of business owners surveyed who did not sponsor retirement plans had never heard of SIMPLE; 54 percent had never heard of Simplified Employee Pensions, or SEPs, created in the Revenue Act of 1978 to relieve small businesses of the potential burden associated with administering qualified retirement plans.

Small business owners were much more familiar with 401(k) plans, which sometimes can seem too complicated or expensive for small businesses, according to Steven J. Rose, vice president and product manager for Nationwide Financial pension products.

“We were not surprised by the survey results, but we do believe many small business owners are making the choice, based on incomplete information, not to offer a retirement plan to their employees,” Rose says. “If they knew how easy and affordable it can be to establish a retirement plan using today’s products, technology and the assistance of a local expert, perhaps more would make the choice to offer a plan.”

According to the study, 65 percent of respondents with plans said offering a plan gives them a competitive advantage in employee recruitment and retention. The positive effect retirement plans have on employee attitude and performance was a major reason for 64 percent of small business owners surveyed.

Thirty-nine percent of small business owners not offering a plan said they were likely to offer one in the next two years. In addition, 69 percent of business owners who did not sponsor a plan said an increase in business profits might motivate them to sponsor one. Sixty-five percent might be motivated by business tax credits and 52 percent by reduced administrative requirements for retirement plans.

“We believe this survey helps draw attention to the reasons many employees of small businesses do not have a retirement plan available to them,” says Rose. “If employers knew more about their options, they might find administrative requirements are not as extensive as they think. Not only would sponsoring a plan help them attract and retain high quality employees, but the tax benefits might also surprise them.

“Of course there will be some organizations where a plan just won’t work,” Rose adds. “But I think this study shows clearly that there are some opportunities being missed that could benefit both small businesses and their employees.”

To test your knowledge on the specifics of sponsoring a retirement plan, check out the Small Business Retirement Quiz at or